Technology Transfer

Prof. Crawford
EN 90
 What is Technology Transfer?

The technology transfer process helps a

manufacturing company more effectively use its
human, physical, and capital resources by
providing knowledge, information, or assistance,
which leads to improvements in its facility,
equipment, manufacturing methods,
management methods, or marketing methods.
 Technology Transfer

Invention

Marketing Technology Innovation

(Diffusion) Transfer

Design
 Simple Example

• Incredible that people a million years ago invented

the wheel that would be useful for so long. They saw
the need for such a device that would make certain
tasks easier – invention.
• Someone needed to device a way to utilize the wheel
– innovation
• Turn idea into reality and implement other ideas to
use the wheel – design
• Further developments need promotion and
device/idea needs to be disseminated - diffusion
 Inventions

Some are nothing more than scientific curiosity for

years before being transformed into a working device,
prototype, or product
Utensils, mast for
100 Years
Aluminum sailboats window
(H. Saite-Claire frames – late 1950’s
Deville, 1854)
90 Years
Total Internal Fiber Optics
1971
Reflection
(William Wheeler, 1881)
43 Years
First I Prototype Gas
Theory of Lasing
discharge laser 1950
(A. Einstein, 1917)
 Inventions
Some inventions have immediate appeal

X-Rays Few Years 1900’s

(1895 – William Rontgen) Used in Medical
Profession
 Inventions
Some Inventions are forced

35 years

Radar Nothing happened

(Patent, 1914) 1940’s
unworkable successful need
WWII

The ‘need’ preceded the product

 Inventions
The need proceeded the product – another example

The vacuum tube was bulky, fragile, power hungry, and

had lifetime issues – it was inherently unreliable

The need for a transistor existed long before its invention

Bell laboratories poured money into it resulting in the first

patent of the resistor (1940)
In 1951, the first point – contact transistor was
manufactured
 The complicated path of Invention
Bundles of
glass Fibers;
Total internal Long uniform quartz
Baird, 1927
reflection, W. fibers; Boys, 1887
Wheeler, 1981
Cladding on fibers
Guiding output of Van Hell, 1952
cathode discharge
lamps; Reeves, 1950 Minimum
attenuation
Laser, 1960’s Theory of attenuation losses
resulting from impurities, achieved
Kao and Hockman 1960 Maurer, 1970

TODAY – Telecommunications, Medicine, dentistry, displays

 A Fundamental Question of
Technology Transfer
• Why do inventions, in some cases, take so
long to reach the market place?
• What factors govern the time lag between
invention and application?

In today’s marketplace, speed to market

dictates success or failure
 Innovation

Invention Product

This period of development is characterized by INNOVATION!

 Innovation vs. Invention

• Invention = Original Concept

• Innovation = the development, refinement,
and change of an existing idea / product

• E.g. easier to manufacture, Cheaper to

Fabricate, Better Performance, More reliable
 Then and Now

• The wheel has been improved over

thousands of years – improvements evolved
slowly
• Consumer Electronics Industry, time to
market: 1980 = 1.5 years
1990 < 1 year
• Today, there is a lot more effort on conscious
design and modeling
 Design

• Design is part of the innovation process,

sophisticated modeling and software shaves
years off the development process

• Many issues can be identified during the

modeling stage, before prototyping – saves
time and money
 Diffusion

• Sometimes referred to as marketing,

– everything that is involved in the promotion and
sale of the product
• Also important is promotion by use of
publication
• Users and customers have important input on
how to improve or refine the product
• Can conflict with IP
 Relationship – Invention,
Innovation, Design, and Diffusion

Naïve Model - Linear

Diffusion
Innovation
Invention Design

What’s Wrong with this Model?

• Feedback from each stage
• No real beginning and end, invention is often continuous
 Realistic Model

Innovation – Embrace the entire Process

Technology Transfer – Means to achieve
innovation
Innovation

Technology
Invention Design Diffusion
transfer

Embraces the entire process

 Some Working Definitions

• Technology Transfer The transactions

between changing technology and invention,
innovation, production, and diffusion

• Innovation – The exploitation of new ideas

 Reasons to Innovate
• Competition – Keep ahead of Competitors
• Science & Technology – Technological change can
be the result of science push and changes in the
science and technology base lead to product
innovation
• Market – Customer feedback influences innovation
leading to product improvements
• Legislation – Government can force innovation (e.g.
safety, environment, economic Policy)
• Human Nature – Curiosity “what happens if I do
this…?”; Laziness “There must be an easier way to
do this”
 Innovation as a Policy

• Innovation does not guarantee success, but a lack of

it will ultimately lead to failure
• Innovation and invention are integral and key to many
companies (e.g., Philips, 3M)
• Each year Nissan holds a competition for its
employees to come up with a novel form of transport
• Innovation is policy, change is inevitable and in part is
driven from within the company. The company is not
simply waiting to respond to one another of the
external proximal cases, but is itself a vehicle for
change.
 Benefits to Innovation

Apart from innovate to survive;

• Competitive Advantage
• Increased Market Share
• Higher Growth Rates
 Manufacturing Companies 1945 - 1982
1965
1950 1955 (Semi- 1975 1980 1982
Rank (Vacuum Tube) (Transistor) conductor)

1 RCA Hughes TI TI TI Motorola

2 Sylvania Transitron Fairchild Fairchild Motorola TI
3 GE Philco Motorola National National NEC
4 Ratheon Sylvania GI Intel Intel Hitachi
5 Westinghouse TI GE Motorola NEC National
6 Amperex GE RCA Rockwell Fairchild Toshiba
7 Nat Video RCA Sprague GI Hitachi Intel
8 Rawland Westinghouse Philco/Ford RCA Signetics Philips
9 Eimac Motorola Transitron Philips Mostek Fujitsu
10 Lansdale Clevite Raytheon Amer’Micro Toshiba Fairchild
 Information

• Inventors and Innovators need information

available to them
• Knowledge – Base information – often
academic and abstract, contained in journals,
scientific magazine, patents, and at
conferences.
– Ex. Transmission of light through a glass fiber is
limited by impurities in the glass rather than inherent
properties of glass. This was published in an archival
journal, but did lead glass manufacturers to improve
the quality of glass by reducing impurities – this
paved the way for fiber optics
 Information

Skills based information – information acquired by doing

something. It’s hands-on experience. Skills learned by
training and participation. Go to another institution where the
skills are practiced, or skilled personnel can be brought in.
 Information

Equipment based knowledge – Knowledge conveyed via

products/devices. Knowing what machine tools are available
and what they do, what merchandise is available in the
marketplace and what features it has.
Also conveyed in trade journals, magazines, and
conventions.
Another information channel is through sales reps,
advertising, other companies, etc.
 Technology
• Technology is key to economic growth and international
competition
• Research must be exploited to produce new products /
devices
• Technology transfer becomes vital, especially today
when time-to-market is key to success
• Scientific push is usually not an engine for technology
transfer
• Science often predates its application by decades
• Without scientific curiosity, there would be no
technology transfer
• With continual invention and innovation, technology will
become outdated
 Technology Transfer Process

IBM grants a license to the government of Taiwan – the

computer corporation undertakes a transfer of knowledge.
French cheese maker passes on recipes to Japanese
firms – transfer of knowledge
Brown University organizes a short-course – transfer of
educational and technology information

The flow of information and

knowledge are various and
Flow of
wide ranging.
information
 Innovation Process Checklist
Technology Transfer is a subject of Innovation
Evaluate Secure
Identify Technology Technology Technology

Prototype Protect
Technology
Technology
Awareness Product
Training Specific
Training
 Barriers to Innovation
• Management Attitude: Upper level management does not
embrace change easily
• R&D effectiveness: Needs to be continuous, not discretely
when a new product is needed
• Short Term Pressures: Companies take a short term
perspective by not investing in higher risk, long term payoffs
• Resistance to Change: Same-old, same-old; comfortable with
current position
• Poor Information Flow: Need to maximize flow of information
around the company… poor information flow hinders
technology transfer
• Weak Links: Good idea’s products can be destroyed by poor
marketing or not listening to customers
Information Collection
 Where do I get Market
Information?
Customers 89%
Business contacts 82%
Competitors 82%
Suppliers 74%
Employees 70%
Trade representatives 67%
Business affiliates 63%
Industry experts 60%
Manufacturer’s salesforce 59%
Social networks 48%
Friends 48%
Subcontractors 41%
Consultants 33%
Family members 30%
Impersonal Sources of Information
Trade magazines 96%
Sales brochure 70%
Advertising 63%
National newspapers 60%
General magazines 56%
Journals 56%
Local newspapers 52%
Manufacturer materials 52%
Catalogs 51%
Annual reports 41%
Government publications 22%
 Innovation: Value to Company

• Increased Competitive Advantage

• Improvement in Quality
• Cost Savings
• More Flexibility
• Better Service to Customers
• Reduction in lead times
Companies with strong investments in innovation tend
to achieve better cash flows and earnings
performances
R&D correlates with long term growth
 Information Collection

• Well organized approach for monitoring

technological and scientific intelligence
• Good R&D organization to encourage
information flow (both internal and external)
• Accurate Knowledge of the company’s own
technological position and capabilities
(technology reviews and audits)
• Efficiently organized information on markets
and competitors
 Research and Development
Hitachi Model (Japan)

Independent Research
• Basic Research plus elementary
technological research
• At advanced research lab, central research
lab, and the nine corporate labs
• Funded by head office – long range research
strategy
 Hitachi Model (cont.)

Commissioned Research
• New Product Development
• At Central and Corporate Labs
• Sponsored by business unit, factory,
subsidiary companies
Product Improvement
• In the development departments at the
factory
• Funded by factory
 How much to spend on R&D
Company % Sales on Country
R&D
Cannon 11% Japan
3M 7% US
Philips 3% Netherlands

The norm of US companies is about 3%

A small company (like yours) needs to define a research
policy
 Assessing Technology
Assessing future technological innovations is usually
done in a technology review or audit
3 Parts

1. What is the competitors Technology (what do they

got?)
2. Review companies own Technology (“what do we
got?”)
3. Review what state-of-the-art Technology (“what
could we have”)
 Technology Portfolio
Technology Importance Low Position High Position
High High Importance
Business Attractiveness Importance B
A
C D
Low Position High Position
Low Importance Low Importance
A: Attractive Business, not much competitive position, use R& D
Resources to gain competitive advantage
B: Attractive Business, good competitive advantage. Company
should sustain funding and resources, be prepared for counter attack
C: Poor Position, company should not use resources here
D: Mixed, not important technology for company, move to cell B or
eliminate
 Market Potential

• Identifying Potential Customers

• Recording Data
• Classifying External Influences
• Analyzing Results

This can help dictate R&D resources

 Benchmarking
Benchmarking results help understand the amount of
changes required to set strategic targets and guide
planning efforts. There are four types of benchmarking.

Internal: Comparison of Internal Operations

Competitive: Competitor-to-Competitor comparisons for
products/services of interest
Functional: Comparisons to similar functions – with the
same broad industry or to industrial leaders
Generic: Comparisons of business processes on functions
that are very similar regardless of industry
 Searching for Technology

• Very few small to medium size companies will have

the necessary expertise or R&D resources and
infrastructure to provide new technology.
• Companies that want to develop something must be
able to find other organizations that can help them
• Information is key to finding new technologies
• Companies must know where they can go to find
information on products, research activities, finance,
IP, etc.
• How can a small company leverage off of a
university?
 Using Higher Education Research and
Development
Universities can often help small and big companies
with R&D. The University often offers much cheaper
rates than a private research company.

• Access to new technology (A lot of pie in the sky

stuff)
• Keep abreast of new developments
• Access consultancy skills
• Professors are possible technical board members
• Develop joint new technology, benefits both.
 Linking Organizations to Educational
Establishments

University Industry

Forming Links
1. Graduate Employment – companies hire graduates and create
a natural link back to their alma mater
2. Sabbaticals – Companies hire university professors to work
on-site for a year or semester to bolster in-house expertise
(pretty cheap)
3. Industry/University Research Units – Organized research units
where focused groups at the university partner with
companies (e.g. in the US, NSF, MRSEC). Companies gain
access to professors, students, and earn results
4. University/Industry Liaison Units – Universities are creating
internal organizations that are in charge of protecting and
developing valuable new technologies to be transferred to
industry. At Brown, the campus based technology transfer
unit is BURF, Brown University Research Foundation.
 University – Industry Partnership

Product ideas, real world

perspective, focused
problems, prototyping
facilities, market experience
In
for
m
ati
on
New results, interesting
devices, research with
seemingly no applications,
professors, and students
 Paths of Technology Transfer Company w
Campus-based
technology No
Government University exclusive Company x
Funding research Invention transfer group
right

Company z

Company x Exclusive
right to
Campus- use it
based
Funding technology
University Option to
transfer group
research Invention exclusive right

option
Company y

no
Company w

Company x
Exclusive right to use
Company z
 Company to Company Transfer

• Private companies with R&D facilities ‘produce’ a lot

of innovative ideas that they may or may not patent
or develop. These ideas may not be in their business
plan, not within their core competencies, or returns
are too small. These ideas may be suitable for
another company.
• A small company company acquired by a big
company or selling off its technology to a big
company
• Inter-Company transfers. Your idea is now being
transferred to products group or manufacturing.
 Company to Company Transfer
Company x
products
group
Company x Innovation
research idea
Spin-off of
Company X

Company Y
buys
technology

Company SB Innovation Company Z buys

Small Business idea company SB on
right to invention
 Collaborations between
Companies
Agreements for organizations to work together
• Alliances
• Networks
• Cooperatives
• Collaboration
These arrangements could be with suppliers,
customers, and even competitors
Many times manufacturers form alliances to work
together but retain their individual brand names.
 Technical Partnerships

Another form of technology transfer is through technology

/ engineering collaborations to increase their expertise by
sharing knowledge, skill, and personnel.

What is the goal of a technology collaboration?

- To improve the Innovation Process
 Why Collaborate?
If you are faced with a problem that you cannot solve
yourself – technical, financial, or commercial problem:
• To share risks
• To share costs
• To gain technological know how
• To speed up product development
• To develop industry standards
•To gain additional markets
• Reduce time-to-market
 Barriers to Transfer
What hinders technology transfer and what cause joint projects
to fail?

• Lack of awareness – what technologies are available to them

• Lack of knowledge – If staff of company is lacking technical
knowledge, it may not be able to capitalize on the technology
being offered in the transfer
• Lack of funds – company may not be able to afford the
development costs of the technology being transferred
• Lack of common interests – Individuals putting the interests of
their own company ahead of the alliance
• Conflict of interest – Even in collaborations on the technical
level or strong, it has been found that collaborations between
competing companies doesn’t work.
 Barriers to Transfer (cont.)
• Lack of Trust – If little trust exists between
companies, it is doomed to fail
• Poor communications – Fail to keep each abreast on
everything relevant to the collaboration, activities,
thoughts, processes, goals, direction of venture
• Lack of infrastructure – company may lack equipment
and facility in infrastructure to take on the transfer
• Over-committed – The company may be over-
committed on current projects and simply lacks the
time needed for success.
 Barriers – With Regard to
Collaboration
• Technical Problems – which are generally overcome,
but which add time and money and frustration
• Resource Limitation – Poor budget control
• Change in Project’s Structure – Loss of key members
or loss of partner
• Organizational Problems – due to a partner losing or
changing interest in the technological side.
 Evaluating the Technology

Large companies solicit proposal on new and innovative

ideas. There will be well defined criteria for the
assessment of new proposals

• Is proposal consistent with company strategy

• Any synergy with existing efforts on projects
• Have the risks, advantages, potential payoffs, and
implications been considered in detail

Proposals may be evaluated by internal or external

reviewers
For small companies, startups, they are contained in
business plans.
 Financing Innovation

• Has major influence through innovation

process and technology transfer
• Before funding is obtained, costs and benefits
need to be thoroughly analyzed
• What is the payback period?
 Protecting Technology

IP plays a vital role in technology transfer. Those

interested I the technology will want to hear that there
is a strong IP position. If others have IP that is close
to yours, this may muddy the waters!
• Patents
• Trade-Secrets
• Trademarks
• Copyrights
• Confidential Information
The Importance of IP cannot be over-emphasized
 To Prototype or Not To Prototype,
That is the Question
Advantages Disadvantages

Identify issues
Prototype and Expensive and
potential problems time consuming

Save money Could miss

No & design flaw, for
Prototype Time to market example

By prototyping you can minimize risk and uncertainty at the

expense of cost and time
 Prototyping

Assists in the following areas

• Planning of implementation
• Feasibility
• Clarification of necessary requirements
• Explore Options
• Improve product
• Improve understanding
• Verify Design
• Explore maintenance issues
 Prototyping Risks
• Increased time-to-market (increased
development)
• Prototyping too early
• Insufficient testing of materials (components)
• Lack of knowledge in new technical
environment
Example of Response Time of New Product
Development of Mechanical Transmission

Develop design concept 2 3

Complete layout and design 1 3
Design review 1.5 1
Detail design 1 4
Manufacture prototypes 2.5 6
Pilot test and power test 1 2
Field test 4 8
Manufacture first product 4 7
Total Time 17 34
 Prototypes

A well designed prototype can help you market

your idea to potential partners.
 Determining the Value of your
Invention:
License Agreement
• Value – How much the licensor is entitled to as
compensation from the licensee in exchange for
licensing rights
• Compensation (Royalty) – Income for the licensor at
the expense of the licensee
• How to arrive at a fair royalty: Many Models
• Simple model to calculate impact on royalty rates and
compensation by fixed dollar payments have differing
effects on pricing behavior.
(that doesn’t make sense, stacy…)
 Royalties

• Running Royalty is most popular. The sharing of

success, achieved through the distribution of profits –
This is considered a good indication:
– Profits: A share of 25% of profits
• Profit is not an ideal metric to base royalty payments
on because of the different accounting ways that can
be represented.
– Net Sales: A share of 5% of net sales
 Royalty: % of Net Sales
(many models)
• % may be constant
• It might also decline beyond certain base
levels as sales rise (incentive to licensee to
promote sales)
• Increase at higher volumes
 Royalty Rate Payment

• Often accomplished by up-front payment –

License Fee
• A minimum annual royalty payment

Up front money serves a few purposes:

• Immediate returns to licensor
• Incentive for licensee to bring technology to
market
 Lump-sum Payment

Sometimes royalty payments are impractical

• A process
• The technology is a small part of a
complicated system
 Other Compensation

1. Royalty fee for sub-licensees

2. Stocks
3. Equity (works for many small start-ups)

(2) and (3) allow licensor to participate in profits

and increased control of business
 Ball Park Ranges

IP RANGE
Patent 0.2 – 35%
Licenses
Trade 0.2 – 15%
Secrets

Tabulated from biological, chemical, electrical,

mechanical
 Present Value of Royalty
R(1+r)-n
For the licensor, the investment is in the past
Year Expected $1.00 Amount
Royalty
1 $200,000 .91 $182,000
2 $200,000 .83 $165,000
3 $200,000 .75 $150,000
4 $200,000 .68 $137,000
5 $200,000 .62 $124,000
Total: $ 1 M $758,000
r =10% (Present value of
royalty payments)
 Fixed Sum Equivalents of Running
Royalty
• If the market interest rate is 10%, this is the
opportunity cost or rate that is forgone if the
licensor elects a running royalty
• Lump sum payments can be invested in the
market
 Simple Model for Negotiating
Royalty
• An array of considerations or variables
judged to impact the royalty
• Reasonable estimates on dollar valuations of
the variables impacting the royalty
• Weights impacting relative worth on the
variables impacting royalty
 Variable Affecting Royalties

• Degree of Exclusivity (exclusive, non-

exclusive)
• Anticipated Net Sales
• Type of License (Patent or know how)
• Term of License
• Terms of Licensee (guarantees, immunities,
etc).
Royalty Rate Matrix-Type Array
$ Amt. New $ Amt. P% New royalty
assigned to after beginning after
variable negotiation royalty negotiation
B j (2) B j (2)
xP x (i (1))
Bi (1) Bi (1)
Variables Bi(1) Bj(2) Ci(1) Cj(2)
affecting
royalty
A1(1) B1(1) B1(2) C1(1) C1(2)

A2(1) B2(1) B2(2) C2(1) C2(2)

A3(1) B3(1) B3(2) C3(1) C3(2)

Total Bi(1)  Bj(2)  Ci(1)  Cj(2)

=P
 Sample Calculation
Variables Amt. Amt. Royalty New
affecting Proposed Negot’d. Impact Royalty
royalty
Net Sales 50,000 60,000 3.55 4.26

Exclusivity 30,000 30,000 2.25 2.25

Immunity from (10,000) (10,000) (.70) (.70)

lawsuits

New Product (20,000) (20,000) (1.45) (1.45)

risk (heavy
marketing)
Patent 20,000 20,000 1.45 1.45

Total 70,000 80,000 5.00 5.71

 Examine 1st Row
A Bi(1) Bj(2) Ci(1) Cj(2)
Variable Amt. Amt. Royalty Impact New Royalty
Requested Negotiated Impact

Net Sales 50,000 60,000 3.55 4.26

Bi(1)/Bi(1) * 5% = Bj(2)/Bi(1)*Ci(1) =
50,000/70000 * 5% 60,000/50,000 *
3.55

TOTALS 70,000 80,000 5.0 5.71

 Summary – Technology Transfer

• Innovation and Technology transfer is

exciting, but it is a complex process
• Innovation and Technology transfer are a
judicious mix of management and science,
creativity with technology.